Dublin Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next
ID: 2429591 • Letter: D
Question
Dublin Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2018, Dublin Chips expects to deliver 615 prototype chips at an average price of $95,000. Dublin Chips' marketing vice president forecasts growth of 65 prototype chips per year through 2024. That is, demand will be 615 in 2018, 680 in 2019, 745 in 2020, and so on. (Click the icon to view additional information.) (Click the icon to view the data on the two options available and additional information) Present Value ol $1 table Present Value ot Annuity.ot $1.table" Euture Value ot S1.table Euture Value ot Annuity.of Read the reauirements 3. Requirement 1. Calculate the cash inflows and ouflows of the modernize and replace alternatives over the 2018- 2024 period. First, determine the cash inflows and outflows of the modernize alternative over the 2018 to 2024 period. (Use a minus sign or parentheses for a cash outflows. If a box is not used in the table, leave that box empty, do not enter a zero.) Units Net cash Initial Proceeds from Year sold contributions investments sale of equipment Jan 1, 2018 Dec 31, 2018 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 31, 2023 Dec 31, 2024 Next, determine the cash inflows and outlows of the replace alternative over the 2018 to 2024 period. (Use a minus sign or parentheses for a cash outflows. If a box is not used in the table, leave that box empty, do not enter a zero.) Units Net cash Initial Proceeds from Year sold contributions investments sale of equipment Jan 1, 2018 Dec 31, 2018 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 Requirement 2. Calculate payback period for the modernize and replace alternatives. (Round your answers to two decimal places.) The payback period for the investment assuming the modernize alternative is The payback period for the investment assuming the replace alternative is years. years.Explanation / Answer
Net
Proceeds
Cash
Initial
from sale of
Year
Units Sold
Contributions
Investments
equipment
Total
Jan1 2018
$ -3,71,00,000
$ -3,71,00,000
dec31 2018
622
$ 1,08,85,000
$ 1,08,85,000
dec 31 2019
687
$ 1,20,22,500
$ 1,20,22,500
dec 31 2020
752
$ 1,31,60,000
$ 1,31,60,000
dec 31 2021
817
$ 1,42,97,500
$ 1,42,97,500
dec 31 2022
882
$ 1,54,35,000
$ 1,54,35,000
dec 31 2023
947
$ 1,65,72,500
$ 1,65,72,500
dec 31 2024
1,012
$ 1,77,10,000
$ 72,00,000
$ 2,49,10,000
Contribution per unit = $75000 - $57500 = $17500
Replace Alternative:
Net
Proceeds
Cash
Initial
from sale of
Year
Units Sold
Contributions
Investments
equipment
Total
Jan1 2018
$ -6,38,00,000
$ 45,00,000
$ -5,93,00,000
dec31 2018
622
$ 1,67,94,000
$ 1,67,94,000
dec 31 2019
687
$ 1,85,49,000
$ 1,85,49,000
dec 31 2020
752
$ 2,03,04,000
$ 2,03,04,000
dec 31 2021
817
$ 2,20,59,000
$ 2,20,59,000
dec 31 2022
882
$ 2,38,14,000
$ 2,38,14,000
dec 31 2023
947
$ 2,55,69,000
$ 2,55,69,000
dec 31 2024
1,012
$ 2,73,24,000
$ 1,70,00,000
$ 4,43,24,000
Contribution per unit = $75000 - $48000 = $27000
Net
Proceeds
Cash
Initial
from sale of
Year
Units Sold
Contributions
Investments
equipment
Total
Jan1 2018
$ -3,71,00,000
$ -3,71,00,000
dec31 2018
622
$ 1,08,85,000
$ 1,08,85,000
dec 31 2019
687
$ 1,20,22,500
$ 1,20,22,500
dec 31 2020
752
$ 1,31,60,000
$ 1,31,60,000
dec 31 2021
817
$ 1,42,97,500
$ 1,42,97,500
dec 31 2022
882
$ 1,54,35,000
$ 1,54,35,000
dec 31 2023
947
$ 1,65,72,500
$ 1,65,72,500
dec 31 2024
1,012
$ 1,77,10,000
$ 72,00,000
$ 2,49,10,000
Contribution per unit = $75000 - $57500 = $17500
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